Half way through three-year Rebuild phase, with further investment made in improving our brand and membership offer

Capex of £149m (2015: £144m) as further improvements made to food stores and funeral home estate

Costs from supporting functions increased from £37m to £52m to support required investment in brand and membership relaunch, and creation of new Digital division

Major investment in Co-op colleagues as 5,400 managers attend “Being a Co-op Leader” events and all 70,000 colleagues embark on “Back to Being Co-op” sessions

More than 5 million members set to receive new Co-op cards to mark the launch of our compelling new membership offer, placing customers and communities firmly at the heart of the Co-op again

Successful disposal of non-core food properties which do not align with food strategy focused on delivering a compelling and convenient shopping experience for members

Debt at £0.7bn (2015: £0.6bn), in line with stated aim to keep debt around £0.9bn during Rebuild

Richard Pennycook, Group Chief Executive of the Co-op, said:

“These are exciting times for the Co-op as we continue to make this a better business that is more relevant for members, customers, communities and colleagues. These results, along with today’s relaunch of our compelling new membership offer, show the real value of “being Co-op” and our difference as a business. Revenues across the Group have grown and, in line with our strategy, profitability has fallen due to our major Rebuild investment, pay increases for our people and price cuts for our customers. We are able to invest for the long-term, strengthening the appeal of our products and services, because our business model allows us to pursue our unique approach, championing a better way of doing business for customers and communities.

“This long-term approach is evidenced by the continued reshaping of our Food store portfolio to support our own-brand, convenience-led strategy. This means we can, as necessary, forgo sales growth in order to ensure we have the right stores in the right places for our customers.

“We are only half way through the Rebuild and much remains to be done, whether it is investing in our digital capability or campaigning on key issues. We remain firmly on track with our plans and are encouraged that the work we are doing is attracting more and more people back to the Co-op.”

Allan Leighton, Independent Non-Executive Chair of the Co-op, said:

“We are delighted that our members, our customers and our people have so enthusiastically backed our plans to create a new Co-op economy, based on a better way of doing business. These results show that we are moving in the right direction – be that in going back to our roots with a return to an iconic brand, the launch of our new member offer or our partnership with the British Red Cross which has already raised £3m. It is the support of our members, under a strengthened governance structure enhanced by committed colleague engagement, that means we can continue to pursue our strategy with confidence.”

Summary of business performance

Food

Clear momentum in strategy to deliver a compelling and convenient shopping experience to millions of customers and members every day within their local communities

Like-for-like sales grew 3.1%

Core convenience business grew 4.3%

Food business has had six consecutive quarters of positive life-for-like sales

Sale of the remaining assets within Somerfield Stores Limited, recognising a profit on disposal

Sale of 298 smaller Food stores, which fell outside of our core strategy, to McColls for £117m. The sale proceeds, once received, will be re-invested to further deliver the Food strategy. Whilst the sale in the short-term will reduce the number of outlets by around 10%, the revenue impact will be circa 3%, given the average size of the stores being sold

Funeralcare

Market-leading position further strengthened in a period when the death rate fell year on year by 11,000 to 303,000

Funeral plan sales increase significantly through a strong focus on member pricing and website improvements, with 60% of new plan sales coming from members, up from 30% previously. Co-op Funeralcare’s market share for funeral plan sales now top 25%

12 further funeral homes opened, including our 1000th. Continue to be the only UK funeral director to offer an apprenticeship in Funeral Operations and Services

Agreed the sale of crematoria operations to Dignity for £43m, to invest more into core funeral homes business

Re-launched Simple Funeral, cutting the price of lowest price funeral by 7%, making products more affordable without compromising on quality

Improvement of website to include an online comparison tool to make funeral planning more accessible and transparent

First business to sign Fair Funerals’ new enhanced pledge to tackle funeral poverty

Increased premium levels reflect motor price rises across the industry, but also initial benefits from the investment made into our pricing capabilities

Total in force policy count increased from 1.28m to 1.48m

More than 100,000 more new policies sold, compared with same period in 2015

In line with Group’s strategic community focus, GI launches new partnership with Neighbourhood Watch and Brake as part of the “making communities safer campaign”

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Legal Services

Sales rose to £11m (2015: £10m)

Underlying operating profit of £1m (2015: £Nil)

Acquisition of Collective Legal Solutions at the end of 2015 enables our legal services business to expand its Wills, Trust and Probate services across England and Wales

Electrical

Sales declined to £33m (2015: £36m)

Underlying operating loss of £1m (2015: £1m loss)

Electrical business moved into the Co-op’s new Digital division to provide it with greater focus and digital capability to enhance the customer offer and experience

Membership, democracy and governance

Successful AGM in May; announced we were going back to ‘Being Co-op’ by placing membership and community firmly at the heart of our business again

Unveiled a return to iconic blue clover-leaf logo with around half the estate rebranded before the end of 2017 and plan for launch of new compelling membership offer, which is detailed in a separate announcement today

Group Board further enhanced with the appointments of Lord Victor Adebowale as a Non-Executive Director, Margaret Casely-Hayford as a Member-Nominated Director and Ian Ellis as an Executive Director

Colleagues

Full annual impact of the 8.5% pay award for food colleagues, announced last year, which took them ahead of the National Living Wage threshold

Colleagues actively involved in shaping the Co-op under strengthened governance structure, with 17 colleagues on the 100 strong members’ council

Co-op Executive takes strong leadership position, post the EU referendum, on the call to allow existing colleagues from EU to remain in the UK

Over 440 new Co-op apprentices appointed in the first six months

Co-op colleagues participate in the new membership offer trial, with a sharp increase in colleague sales witnessed

70,000 Co-op colleagues embarked on a unique “Back to Being Co-op” journey which reconnects them with Co-op heritage and values

Significant investment made in building the leadership skills of our colleagues with over 5,400 attending “Being A Co-op Leader” programme, with phase 2 now underway

Co-op colleagues played a major role in us reaching £3 million fundraising mark to help tackle isolation and loneliness

Outlook

Whilst we are mindful of some political and economic uncertainty, our focus remains on delivering the next-stage transformation initiatives which will complete our three-year Rebuild during 2017. Central to this will be the roll-out of our new brand and membership offer, which will reward our members and their local communities on the back of Co-op trade. The development of this new “Co-op economy” will stimulate new product development and service innovation, especially from our new Digital team, as well as influencing heavily our future campaigning and community-based strategies. We are now in a position where we can again place our members’ interests firmly at the heart of the Co-op and the next 6-12 months will see far more member-engagement occur so we know we are providing the right mix of goods and services to meet their requirements

In keeping with previous guidance, the Board anticipates dividend payments resuming after the three-year Rebuild programme has completed

Media Enquiries:

The Co-operative Group

Jon Church: 07545 210812Russ Brady: 07880 784442

Tulchan Communications

Susanna Voyle/Jonathan Sibun: 020 7353 4200

* Underlying profit before tax is statutory profit before tax, but stripping out the effects of property and business disposals (including individual store impairment), change in value of investment properties, profits / losses from associates / joint ventures, one-off costs, pension finance income and non-recurring finance costs. A full reconciliation to statutory profit before tax can be found on page 16** Gross written premium (GWP) is the total expected value of all new and renewing policies in the period*** Net earned premium (NEP) is the amount of premium that has been recognised in the period after reinsurance costs have been deducted.